Visa: Too Early to Tell How Restructuring Will Impact Interchange

The reorganization of the Visa bank card association will allow the resulting company to invest in new payments technologies and cultivate promising new acceptance markets, but the ultimate impact on the way the business sets interchange pricing is unknown, says a spokesperson for Visa International, the umbrella organization that has responsibility for Visa's global business. “It's too early to tell” how the emergence of Visa Inc., the entity that is expected to emerge from the sweeping reorganization announced last week (Digital Transactions News, Oct. 11), will affect the way the controversial fees are set, says Cheryl Heinonen, head of global corporate relations for Visa International. Acquirers pay interchange to issuers in both the Visa and MasterCard Worldwide networks, then pass those fees on to merchants, with a markup, as discount fees. The associations have steadily raised interchange rates in recent years, triggering last year a slew of merchant suits alleging anti-competitive price fixing by the associations and several major banks. These cases, which are being consolidated into a major federal action, could create huge legal liabilities for the defendants. MasterCard, which went public this spring, and Visa, which says it will follow its reorganization with an initial public offering, have said their actions are in part an effort to address this potential liability by severing their direct ownership ties to member banks. “We're certainly aware of the litigation, and it's something we'll need to address,” says Heinonen, though she says she can't comment on the cases further. She says Visa will likely emerge with a “less unwieldy management structure” that will “invest more in technology where that's appropriate.” She points in particular to new acceptance markets such as fast food, medical billing, and recurring billing as having promise for the new Visa. “In the past year we've seen tremendous improvement” in volume in these markets, she says. As for management, the reorganization is expected to streamline operations by merging into one company all regional units of the current Visa International except Europe, which will remain outside Visa Inc. as a licensee. Visa USA, Visa Europe, and Visa Canada sit on Visa International's board but are separately incorporated operating units. Visa International is responsible for operations within the Asian Pacific, Latin America, and Central Europe, Middle East, and Africa regions. The creation of Visa Inc. and its conversion to public ownership are expected to take anywhere from 12 to 18 months, Visa has said.